Turning to IMF is both right and a right<\/p>\n
Before the government announced its decision to turn to the
\nInternational Monetary Fund for help, economist Kwik Kian Gie had
\nalready made the same suggestion in an article in this newspaper.
\nIn the following discourse, Kwik comments on the government's
\nmove and the strong reactions it has provoked.<\/p>\n
Question: Some commentators are wary that the IMF will be
\ndictating to the Indonesian government. What is your comment?<\/p>\n
Kwik Kian Gie: We have to distinguish between dictating and
\ngiving rational advice. Indonesia has almost always accepted
\nadvice given by the World Bank each time it asks for new loans.
\nIt is also continuously receiving advice from the Harvard
\nAdvisory Group. Why should anyone object to the IMF when we have
\na monetary crisis which could lead to an economic recession?<\/p>\n
Q: Some commentators also say that accepting the IMF terms means
\nlosing our sovereignty...<\/p>\n
A: Indonesia is a fee-paying member with an obligation to help
\nother members in difficulties. In spite of its own problems,
\nIndonesia helped Thailand with a US$500,000 loan.<\/p>\n
If Indonesia is refusing to use its right to an IMF assistance
\nbecause it does not want to be dictated to, then it will be
\nbetter off quitting the IMF. That way, Indonesia won't have to
\npay any fee and isn't obliged to assist other members.<\/p>\n
Q: What about their objections to tough IMF terms?<\/p>\n
A: The same commentators have been calling for thorough reforms.
\nIt is now clear that we could not do these ourselves. We should
\nbe glad if the IMF insisted on those reforms.<\/p>\n
If the government is willing to swallow the IMF's pills after
\nignoring the same recommendations from its own people, that will
\ncertainly hurt. It shows that our leaders are submissive only to
\nforeign parties. But the bigger interest now is to resolve the
\ncrisis, because if we don't, an economic recession is sure to
\nfollow which will harm the welfare of our people.<\/p>\n
Q: Can the IMF help restore monetary stability?<\/p>\n
A: That depends on whether the IMF knows the true condition of
\nthe economy, including how severe the debts are for big
\ncorporations who cannot repay their offshore loans.<\/p>\n
The IMF will possibly only look at the sound financial reports
\nof companies prepared by reputable public accountants. If that's
\nthe way it works, then it cannot help much.<\/p>\n
Will the IMF be content with formal truths or will it go after
\nmaterial truth and insist on investigative auditing?<\/p>\n
Will the IMF be told about companies with loan problems, their
\ncreditors and how much they owe? Is the IMF's definition of
\nproblem loans as loose as that used by Bank Indonesia? If it
\nturns out that companies with large problem loans are owned by
\npeople close to the power elite, will the IMF insist on
\ndisclosure?<\/p>\n
Will the IMF be informed of the true condition of banks in
\nIndonesia? If it learns that many banks have been sustained only
\nby Bank Indonesia's intervention, what will it do?<\/p>\n
Will the IMF have the courage to reschedule projects which in
\nits view are not urgent but which the government regards as
\npriorities -- such as the national car project and the IPTN?<\/p>\n
Q: Some people say that the final conditions would be negotiated
\nbetween the IMF and the Indonesian government...<\/p>\n
A: If that's the way the IMF works, then it should stay out of
\nIndonesia. Not only would its credibility be destroyed because
\nits aid would not be effective, but, by playing politics, the IMF
\nwould be sinning against the Indonesian people. It would be no
\ndifferent from the actions of many of Indonesia's elite. While
\nthe elite put position above anything else, the IMF would be
\nputting its sympathy for the Indonesian government, and possibly
\nthe interest and profit it earns, above anything else.<\/p>\n
Q: President Soeharto, through Minister\/State Secretary
\nMoerdiono, has called on private companies with offshore debts
\nnot to rush in buying dollars, saying they should buy when their
\ndebts fall due, at whatever rupiah exchange rate of the time...<\/p>\n
A: In the absence of any detail, this call is unrealistic. Who in
\ntheir right mind will refrain from buying dollars if they feel
\nthat the rupiah is going to fall?<\/p>\n
What President Soeharto has in mind is for Bank Indonesia to
\nintroduce an instrument allowing these companies to line up in
\nbuying dollars in accordance with their debt repayment schedule.
\nIf there hasn't been any follow-up measures, it is not that the
\nPresident was being unrealistic, but that Bank Indonesia is not
\ninnovative enough.<\/p>\n
Q: Can you think of any appropriate instrument for this?<\/p>\n
A: Bank Indonesia can offer debtors to buy options with premiums
\nlower than the market rate. To qualify for this facility, these
\ncompanies will have to furnish details of their debts, the total
\namounts and the repayment schedule. These options cannot be
\ntraded and are nontransferrable.<\/p>\n
Without having to buy dollars now, these companies would know
\nexactly how much their rupiah obligations were when the time to
\nrepay their debts came. Given this certainty, a debtor would wait
\nuntil that time arrived. If the market rate was higher than the
\noption rate, he could exercise his option. If the market rate was
\nlower, he would buy in the spot market. This, I think, fits with
\nwhat the President has in mind.<\/p>",
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